The more things change...the more they stay the same. Unfortunately, people don't figure that out until some distance has been put between them and the situation in question.
Take Japan for example. For the last few years, Bill has been warning that the United States is entering a long, slow slump, ala Japan. But people refused to see the similarities...but now that they are staring us in the face, it's hard to look the other way.
The parallels are startling. In 1992, then-Japanese Prime Minister Miyazawa wanted to help the banking system with public funds (read: a bailout), but public sentiment was strongly against it.
16 years later, U.S. officials found themselves facing a credit crunch of epic proportions - and responded with the largest injection of liquidity the U.S. markets had ever seen.
And the parallels continue. This is why - as points out Bill, in the 'highlight of week' essay, which we have excerpted below - it is so important to always be looking in the rear-view mirror...so we aren't doomed to make the same mistakes over and over again:
Take Japan for example. For the last few years, Bill has been warning that the United States is entering a long, slow slump, ala Japan. But people refused to see the similarities...but now that they are staring us in the face, it's hard to look the other way.
The parallels are startling. In 1992, then-Japanese Prime Minister Miyazawa wanted to help the banking system with public funds (read: a bailout), but public sentiment was strongly against it.
16 years later, U.S. officials found themselves facing a credit crunch of epic proportions - and responded with the largest injection of liquidity the U.S. markets had ever seen.
And the parallels continue. This is why - as points out Bill, in the 'highlight of week' essay, which we have excerpted below - it is so important to always be looking in the rear-view mirror...so we aren't doomed to make the same mistakes over and over again:
Best Stocks Market
"'In economics,' begins the Wikipedia description, 'hyperinflation is inflation that is very high or out of control... Hyperinflation is often associated with wars (or their aftermath), economic depressions, and political or social upheavals. In both classical economics and monetarism, it is always the result of the monetary authority irresponsibly borrowing money to pay all its expenses.'
"Who's the biggest borrower today? The United States of America. At 12% of GDP, its deficit is more than twice as large as that of France. It already owes Japan and China as much as Germany owed its former enemies in reparations - adjusted to today's money. But America's debts are far grander than those of Germany in 1923 - even relative to the size of the US economy. Where Germany owed a little over $1 trillion; America - if you include private debt, official government debt, off-budget obligations and internal commitments - owes 100 times as much. And the United States keeps borrowing more. In a single year - 2009 - it will borrow $1.3 trillion, again, just shy of the debt that sank the Weimar Republic.
"While the private sector during the bubble years brought U.S. debts to a record 3.7 times the entire nation's output, now it's the public sector that does the borrowing. The Obama Administration is adding to the accumulated U.S. debt at a suicidal pace - 4 times faster than the record set just last year. And America's central bank hands the borrower a loaded pistol; it is adding bank reserves - which allow the money supply to expand geometrically - at a 4,500% rate.
"That last number is not a typo. It's an alarm. If the Federal Reserve were a heart patient, the defibrillators would be on already. If it were a normal bank, it would be closed down immediately.
"But neither Karl Helferich nor Ben Bernanke set out to ruin their economies. Central bankers don't do it intentionally; they do it inevitably. Not because they want to, but because they have to. Like the Germans in the '20s, America has no politically acceptable way to pay her growing debts - except by printing more money. And now, her leading intellectuals urge her on. Cometh the hour when the feds begin to think about cutting back on their program of inflation, cometh the experts who will tell them to keep at it.
"The crisis seems to be easing, and a chorus of critics is already demanding that the Federal Reserve and the Obama administration abandon their rescue efforts," writes Nobel winning economist Paul Krugman in the New York Times this week. "Those demands should be ignored. It's much too soon to give up on policies that have...pulled us a few inches back from the abyss."
"'It's déjà vu all over again,' he concludes, referring to the Japanese in the '90s and the Americans in the '30s. In both cases, he thinks their economies died because they turned off the juice too soon."
"Who's the biggest borrower today? The United States of America. At 12% of GDP, its deficit is more than twice as large as that of France. It already owes Japan and China as much as Germany owed its former enemies in reparations - adjusted to today's money. But America's debts are far grander than those of Germany in 1923 - even relative to the size of the US economy. Where Germany owed a little over $1 trillion; America - if you include private debt, official government debt, off-budget obligations and internal commitments - owes 100 times as much. And the United States keeps borrowing more. In a single year - 2009 - it will borrow $1.3 trillion, again, just shy of the debt that sank the Weimar Republic.
"While the private sector during the bubble years brought U.S. debts to a record 3.7 times the entire nation's output, now it's the public sector that does the borrowing. The Obama Administration is adding to the accumulated U.S. debt at a suicidal pace - 4 times faster than the record set just last year. And America's central bank hands the borrower a loaded pistol; it is adding bank reserves - which allow the money supply to expand geometrically - at a 4,500% rate.
"That last number is not a typo. It's an alarm. If the Federal Reserve were a heart patient, the defibrillators would be on already. If it were a normal bank, it would be closed down immediately.
"But neither Karl Helferich nor Ben Bernanke set out to ruin their economies. Central bankers don't do it intentionally; they do it inevitably. Not because they want to, but because they have to. Like the Germans in the '20s, America has no politically acceptable way to pay her growing debts - except by printing more money. And now, her leading intellectuals urge her on. Cometh the hour when the feds begin to think about cutting back on their program of inflation, cometh the experts who will tell them to keep at it.
"The crisis seems to be easing, and a chorus of critics is already demanding that the Federal Reserve and the Obama administration abandon their rescue efforts," writes Nobel winning economist Paul Krugman in the New York Times this week. "Those demands should be ignored. It's much too soon to give up on policies that have...pulled us a few inches back from the abyss."
"'It's déjà vu all over again,' he concludes, referring to the Japanese in the '90s and the Americans in the '30s. In both cases, he thinks their economies died because they turned off the juice too soon."
The above is just an excerpt from Bill's standout essay from this week. You can read it in its entirety on The Daily Reckoning site - it's an essay you don't want to miss.
We try to keep our dear readers on their toes...and this week was no different. Below, you'll find ideas and insights from our commodities and resources man, Alan Knuckman; an examination of the actual money supply by Paul van Eeden; a dose of optimism from Alex Green - and of course, essays by the Mighty Mogambo and Bill Bonner. It wouldn't be The Daily Reckoning without them. Read on...
Chinese Laughter the Sound of US Stupidity
by The Mogambo Guru
Tampa Bay, Florida
"The winner of the Mogambo Award For Most Imbecilic Statement Of The Month (MAFMISOTM) comes from a Financial Times article where we read that Tim Geithner, whom I ungraciously call (with a sneer and a voice dripping with a tone of Pure Mogambo Contempt (PMC)), the 'rat-like Treasury Secretary of the United States,' tried to convince China that 'the US would do what was necessary to bring its budget under control.' Hahahaha!"
The Bubble of all Bubbles
by Alan Knuckman
Chicago, Illinois
"When the government intervenes into the financial system, it disrupts the supply-and-demand balance, but eventually, true market forces can win out. Months ago, a plan to use $300 billion to buy long-term bonds shocked the market like a cattle prod..."
The Actual Money Supply
by Paul van Eeden
Toronto, Ontario
"Here we have possibly the most influential and powerful banker in the world, who is in charge of managing the most widely used money in the world - the U.S. dollar - telling us not only that he doesn't know what money is, or how to measure how much of it there is, but admitting that it's impossible to manage the money supply precisely because they have not yet figured out what it is or how to measure how much of it there is."
You're Rich and Don't Know It: Best Stocks For 2010
by Alexander Green
Charlottesville, Virginia
"Our ancestors just a few generations removed would marvel at life today. In the first half of the 20th century, for instance, most people earned a subsistence living through long hours of backbreaking work in forestry, mining, farms or factories."
Trends in the Post-Bubble Era
by Bill Bonner
Paris, France
"Forget the rally; it's fake. And forget the 'green shoots.' They'll soon shrivel up in the hot summer sun. There ain't going to be any real recovery in the immediate future until the mistakes of the recent past are corrected. And that, as we keep saying, takes time."
One last note: The DR HQ has been bustling with activity this past week, as we get ready for our big event: The Agora Financial Investment Symposium in Vancouver, British Columbia. This year, we're even more excited than usual, because it's the 10th anniversary of both the Agora Financial Investment Symposium and our humble e-letter The Daily Reckoning.
We would love for you to be there to kick off another decade of success with us, and to help celebrate the past 10 years as well. And, as always, there will be an all-star line-up of speakers and presenters...and the wealth of advice and information you get at this symposium is invaluable.
Please join us there. You won't be sorry. Click on the link below for all the details...but act now - this event is already 70% sold out.
Chinese Laughter the Sound of US Stupidity
by The Mogambo Guru
Tampa Bay, Florida
"The winner of the Mogambo Award For Most Imbecilic Statement Of The Month (MAFMISOTM) comes from a Financial Times article where we read that Tim Geithner, whom I ungraciously call (with a sneer and a voice dripping with a tone of Pure Mogambo Contempt (PMC)), the 'rat-like Treasury Secretary of the United States,' tried to convince China that 'the US would do what was necessary to bring its budget under control.' Hahahaha!"
The Bubble of all Bubbles
by Alan Knuckman
Chicago, Illinois
"When the government intervenes into the financial system, it disrupts the supply-and-demand balance, but eventually, true market forces can win out. Months ago, a plan to use $300 billion to buy long-term bonds shocked the market like a cattle prod..."
The Actual Money Supply
by Paul van Eeden
Toronto, Ontario
"Here we have possibly the most influential and powerful banker in the world, who is in charge of managing the most widely used money in the world - the U.S. dollar - telling us not only that he doesn't know what money is, or how to measure how much of it there is, but admitting that it's impossible to manage the money supply precisely because they have not yet figured out what it is or how to measure how much of it there is."
You're Rich and Don't Know It: Best Stocks For 2010
by Alexander Green
Charlottesville, Virginia
"Our ancestors just a few generations removed would marvel at life today. In the first half of the 20th century, for instance, most people earned a subsistence living through long hours of backbreaking work in forestry, mining, farms or factories."
Trends in the Post-Bubble Era
by Bill Bonner
Paris, France
"Forget the rally; it's fake. And forget the 'green shoots.' They'll soon shrivel up in the hot summer sun. There ain't going to be any real recovery in the immediate future until the mistakes of the recent past are corrected. And that, as we keep saying, takes time."
One last note: The DR HQ has been bustling with activity this past week, as we get ready for our big event: The Agora Financial Investment Symposium in Vancouver, British Columbia. This year, we're even more excited than usual, because it's the 10th anniversary of both the Agora Financial Investment Symposium and our humble e-letter The Daily Reckoning.
We would love for you to be there to kick off another decade of success with us, and to help celebrate the past 10 years as well. And, as always, there will be an all-star line-up of speakers and presenters...and the wealth of advice and information you get at this symposium is invaluable.
Please join us there. You won't be sorry. Click on the link below for all the details...but act now - this event is already 70% sold out.
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